Per guidance on FINRA rule 4210, our clearing firm (Apex Clearing) will aggregate related margin accounts on a primary-sub account basis starting December 12th, 2022. With multiple margin accounts, you can now segment and track your different trading objectives and strategies across several accounts!
TABLE OF CONTENTS
- Primary-sub Margin Account Overview
- Pattern Day Trading
- Balance Requirements and Maintenance calls
- Position Concentration
- Margin Interest
- Frequently Asked Questions (FAQ)
- How many sub-accounts can you open and hold?
- How do I view primary account balances?
- How are sub-accounts related?
- How will margin requirements and hedging comingle across sub-accounts?
- Can sub-accounts have different trading levels?
- Are autotrade accounts related and combined?
- Do primary balances affect taxes and tax documents
- Can I transfer cash and positions between sub-accounts
- Can I open and hold multiple portfolio Margin Accounts?
Primary-sub Margin Account Overview
The primary-sub margin account structure will allow tastyworks customers to hold related margin accounts (sub-accounts) under the same profile. You will fund, manage, and trade in each margin account separately; however, the primary-sub structure will consolidate all related margin accounts (sub-accounts) into a single net liquidating balance (primary account). tastyworks and our clearing firm (Apex Clearing) will then use this primary balance to govern all sub-accounts in scenarios such as:
- Balance Requirements and Maintenance Calls
- Pattern Day Trading (PDT) and Day Trade Calls
- Position Concentration
In short, any balance, action, or restrictionist across your related sub-accounts will be aggregated and applied to all sub-accounts. For example, combined balances can help traders get over the $25,000 equity balance for pattern day trading. Additionally, this makes it much easier for traders to keep track of different trading objectives and strategies if separating them across multiple accounts.
At this time you cannot open additional multiple margin accounts, however we will add this ability come early January 2023.
Related Sub-Account Types
If a margin account has the same beneficial owner, the account will be included in the primary combined net liquidating value.
- Individual Margin
- Autotrade Margin
Un-Related Account Types
- Retirement Accounts
- Portfolio Margin
- Joint Margin (pending addition)
Pattern Day Trading
All day trading governance will occur at the primary level, including equity requirements, day trade counting, and account restrictions.
Day Trade Counting
A day trade occurs when an equity or equity options position is opened and closed on the same day. If a day trade occurs in any sub-account, it will add to your primary day trade counter. Margin accounts are flagged as a pattern day trader when performing more than 3-day trades across all sub-accounts in a rolling 5-business day period. For example, a trader has three individual margin accounts that are all related (under the same primary balance). If that trader places a day trade in each sub-account today, their primary day trade count will increase by three and remain at three for the next five business days. Visit this page here to learn more about how day trades are triggered.
Margin accounts are flagged as a pattern day trader (PDT) when the day trade count reaches four or more in a rolling 5-business day period. Accounts with a primary balance under $25,000 in equity will have all sub-accounts set to closing-only transactions until a PDT reset is used or the primary equity balance closes above $25,000. Thus, the aggregate equity across all sub-accounts will determine your equity balance for pattern day trading. For example, a trader has three individual margin accounts, each with $10,000 in equity. The primary account balance would equal $30,000 in equity, and if a PDT status is triggered, each sub-account is not set to closing only.
Please note that any cash held up in futures and crypto positions will not count toward your combined equity balance. Futures held overnight will result in the overnight requirement sweeping from your securities account (stock and options) to your futures account. When trading and holding digital currency positions over multiple days, the purchase value of the digital currency position purchase will sweep from your securities account to your cryptocurrency account. To learn more about the separation of your securities account from your futures or cryptocurrency account, then please click here.
A Pattern Day Trader (PDT) Equity Maintenance (EM) call is issued when a pattern day trader's combined equity balance falls below $25,000 at the previous business day's close. As a result of the call, the account is set to closing-only transactions. Maintaining a PDT status without restrictions requires a combined equity balance of $25,000 or higher. A margin account must close above $25,000 or higher to meet an EM call. Any fluctuations above $25,000 intraday will not meet the call. However, you may request a reset to remove a PDT status if you cannot meet the call by depositing funds.
Day Trade Calls
Day trade calls differ from Equity Maintenance calls issued from being flagged as Pattern Day Trader. Day trade calls will generate when day trading across all sub-accounts exceeds their combined starting day trade buying power. Additionally, a day trade call can generate when a day trade is placed while an account is under a PDT EM call. When a day trade call is triggered, any restrictions will persist across all sub-accounts until the DT call is met. You can meet a DT call by depositing into sub-accounts or liquidating positions across sub-accounts. To learn more about day trade calls, visit this page here.
Balance Requirements and Maintenance calls
A Required Maintenance (RM) call is issued when the combined margin equity across all sub-accounts is less than the maintenance requirements for all positions. In the event, a call is generated, and the combined Maintenace excess across all sub-accounts is negative, then each sub-account will be restricted from placing buying power-reducing trades. An RM call can be met, and this restriction can be lifted by depositing cash or securities, market appreciation, or closing positions in any related sub-account. However, it is best practice to deposit money into the sub-account with the current maintenance deficit. The required maintenance call will be met once the aggregate maintenance excess across all related sub-accounts stays positive.
In specific scenarios, tastytrade may require higher margin requirements for concentrated positions. A concentrated position occurs when specific securities represent a large percentage of the primary balance's overall value. Thus, if you have a large amount of your combined net liquidity in a single underlying, you may see higher requirements to trade that underlying across all sub-accounts. Please visit our help center page here to learn more about position concentration.
Margin Interest (Pending Change)
Margin Interest will be maintained and charged on a sub-account level. Cash balances across related margin accounts will not offset, and any negative cash balance will accrue margin interest individually across related and unrelated margin accounts.
Frequently Asked Questions (FAQ)
How many sub-accounts can you open and hold?
There is currently an undefined limit to the number of sub-accounts per group.
How do I view primary account balances?
The primary account is a backend balance that will not be listed on any of our platforms or website. However, you can quickly total your balances in the account summary section of our platforms.
How are sub-accounts related?
A margin sub-account is related when the tax identification number under the account matches another sub-account. In cases where an entity account (such as a trust or LLC) matches the tax identification number of an individual account, then those account types may also be grouped. Entity accounts with non-matching tax identification numbers will be separate and have their own individual primary balance. Additionally, retirement accounts are independent, and each is treated as its own primary balance.
How will margin requirements and hedging comingle across sub-accounts?
Margin requirements for positions will not comingle across sub-accounts except for position concentration. Positions across For example, if one sub-account holds +100 shares of XYZ and another related sub-account holds –100 shares of XYZ, the positions would not offset in any fashion, and margin requirements would be completely separate.
Can sub-accounts have different trading levels?
A sub-account's trading level will be unrelated to other sub-accounts. Each sub-account's trading level will have its own separate investor profile and unrelated trading level. Thus, you can have different trading levels across sub-accounts based on your investor profile and objectives.
Are autotrade accounts related and combined?
Yes, margin autotrade accounts will be grouped with all other sub-margin accounts. Any restriction generated across your combined subaccounts will persist in any related autotrade account. For example, suppose an account is set to closing only transactions due to pattern day trading across sub-accounts. In that case, the closing-only restriction will carry over to any autotrade account and prevent new autotrades from being placed until the call is met and the restriction is lifted.
Do primary balances affect taxes and tax documents
All taxable events will be tracked on a sub-account level, with each sub-account generating its own tax forms.
Can I transfer cash and positions between sub-accounts
Yes, our electronic internal transfer process allows sub-accounts to transfer cash between each other. Positions cannot be transferred between related margin accounts. For instructions, see our help center page here.
Can I open and hold multiple portfolio Margin Accounts?
At this time, you can open and hold multiple portfolio margin accounts which are unrelated to any individual, joint, or entity account.